Patents, Research Exemption, and the Incentive for Sequential Innovation

Abstract

We develop a quality ladder model to study the R&D incentive impacts of intellectual property rights with a "research exemption" or "experimental use" provision. The innovation process is sequential and cumulative and takes place alongside production in an infinite-horizon setting. We solve the model under two distinct intellectual property regimes, characterize the properties of the relevant Markov perfect equilibria, and investigate the profit and welfare effects of the research exemption. We find that firms, ex ante, always prefer full patent protection. The welfare ranking of the two intellectual property regimes, on the other hand, depends on the relative magnitudes of the costs of initial innovation and improvements.

Elements of Intellectual Property Protection in Plant Breeding and Biotechnology: Interactions and Outcomes

“…Our results were in agreement with the discussion provided in Pardey et al (2013) and with theoretical results derived in Moschini and Yerokhin (2008). Each of the two primary IPP systems has been shown to have advantages and disadvantages, and neither of them is better than the other under all possible circumstances.…”

“…International Seed Federation data showed higher sustained wheat yields for countries where private sector wheat breeding is a competitive business (France, Germany, United Kingdom) compared with countries where wheat breeding remains largely in the public domain (Argentina, Australia, Uruguay, United States). Moschini and Yerokhin (2008) showed that when research was risky or expensive, then an IPP system with a research and commercialization exception would undermine incentives to undertake that type of research. Kolady et al (2012) showed that yield trends in India for maize (Zea mays L.) and pearl millet [Pennisetum glaucum (L.) R.…”

Dynamic Effects of Patent Policy on Sequential Innovation

“…Studies on the implications of patenting in the context of sequential innovation typically assume that the timing of the second, infringing innovation is exogenous, and occurs either immediately after the first innovation (Chang, 1995; Green and Scotchmer, 1995; Chou and Haller, 2007), or after the expiration of the first patent (Horowitz and Lai, 1996; Denicolo, 2000; Moschini and Yerokhin, 2008). The effect of patent life or scope on a second innovator who does not infringe the first patent is considered in a distinct set of studies, including Gallini (1992), O'Donoghue (1998), and Hopenhayn and Mitchell (2001).…”

Intellectual Property Rights and the Ascent of Proprietary Innovation in Agriculture

“…It is important to understand that the foregoing empirical studies address a narrow question: given that the initial innovation has happened, do IPRs (e.g., patents) on this innovation favor or hinder This question is addressed, in the context of plant-related IPRs, by Moschini and Yerokhin (2008).…”